Significance: Singapore Court of Appeal reverses the High Court decision’s to sanction a scheme of arrangement on the basis that certain majority creditors owed genuine debts to the companies in question, and found that the High Court should not have sanctioned the schemes without proof of authenticity of those debts. The Court also found that there was material non-disclosure of the rejection of a restructuring proposal. The Court of Appeal also considered factors to consider in determining whether a creditor is a related
The Court of Appeal also considered factors to consider in determining whether a creditor is a related creditor to the company (at ):-
(a) The scheme company controls the creditor or vice versa. Alternatively, the scheme company and the creditor have a common controlling shareholder, ie, a shareholder who owns (directly or indirectly) 50% or more of the shares in each of these companies.
(b) The creditor and the scheme company have common shareholder(s) who hold a less than 50% but more than de minimis stake in both companies. In this regard, what would be considered de minimis would depend on the facts; for instance, the threshold would be higher in the case of a public listed company as opposed to a private company.
(c) The creditor and the scheme company have common director(s), in particular, director(s) who propose or support the scheme.
(d) The scheme company and the creditor do not have any common shareholder(s), but their controlling shareholder(s) are either:
(i) related by blood, adoption or marriage; or
(ii) where the controlling shareholder(s) are corporate entities, in turn controlled by individual(s) who are related by blood, adoption or marriage.
(e) The creditor is related by blood, adoption or marriage to the controlling shareholder(s) or director(s) of the scheme company.